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How to Create a Budget

Your budget is, perhaps, the most important aspect of your financial health.

Budgeting enables you to meet your goals and prioritize your expenses. This calculator provides a way to list your monthly and yearly expenses and compare it to your income, making it simple to create a budget. To use the calculator, enter your monthly after-tax income. Select Add Another to add expenses. Use the dropdown arrow for each expense to adjust the label or delete it entirely. To the right of each individual expense, enter how much it costs.

 


Fixed v. Variable

For the fixed expenses, such as rent or phone, it's easy to fill in the exact amount you know you'll have to spend. On the other hand, with the variable expenses, like groceries, there is no single amount you'll spend each month. But based on what you've spent in the past, you should be able to estimate a fairly accurate number for most weeks.

The next step is to compare your income to your expenses. In order to achieve (and maintain) a positive cash flow, you may have to adjust some of the variable expenses—which probably means cutting back or cutting some of them out altogether.

You should revisit your budget on a regular basis. Remember, it's there to help you, and it's not written in stone. Adjusting it if your overall household income changes is important.

Create a Budget

 

Spread the Wealth

If your budget changes because you get an influx of cash, maybe from a bonus or an inheritance, you may be tempted to use it to cover increased variable expenses, like eating out, travel, or the newest phone. Certainly using some of the money that way is fine. But it's also a great opportunity to pay down debt or to increase what you're putting away in savings—either in an emergency fund, a retirement plan, or your investment portfolio.

This article has been republished with permission. View the original article: Budgeting

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